> LaTeX seems to assume everything following the underscore should be subscript,
This is not the actually true. LaTeX takes the first non-space token after the underscore (after expanding macros) as the subscript, unless it is a brace, in which case the subscript is what follows up until the next matching close brace.
If there is an error processing the subscript, as in the examples you have given, TeX may alter the input in order to attempt to recover. In the case of your
$P_\sqrt{x} + 1234$
TeX takes "\sqrt" as the subscript, but when trying to process that, it is missing its argument, and so this produces an error. In particular, the error is
! Missing { inserted.
and it inserts a brace before the \sqrt in an attempt to fix the most probable cause of the error (missing braces around the subscript). So the input is now effectively
$P_{\sqrt{x} + 1234$
This now causes the remainder of the expression to be considered part of the subscript, since the new open brace has no matching close brace. When TeX reaches the end of the expression, it will throw a second error,
! Missing } inserted.
and add a brace at the end, making the input effectively equivalent to
$P_{\sqrt{x} + 1234}$
where the rest of the expression is the subscript. On the other hand, properly formed expressions like
$P_x + 1234$
will make the subscript only the "x", not including the "+ 1234".
So your claim is only true in the case where the subscript produces an error, and only if you ignore the two error messages that TeX generates concerning the incorrect LaTeX that you gave it. If you are running TeX in batch or quiet mode, you will not see the errors, so perhaps that is what is going on in your author's case, but the TeX is malformed, and should never have been accepted in the first place. This does mean you have to deal with how to make it into valid TeX at this point, which is unfortunate. Making the subscript be the rest of the expression is at least consistent with TeX's attempt to recover from the error.
Davide